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(co-authored with CTC senior policy analyst James Handley)

Sheldon Whitehouse gained renown last year for his series of weekly “Time To Wake Up” speeches on the Senate floor addressing the climate crisis. Today, the Democratic Senator from Rhode Island took his climate leadership further as he introduced a comprehensive bill intended to end free dumping of climate pollution into the atmosphere. (Click here for video of the senator’s 80th speech, introducing his bill.)

Whitehouse calls his 30-page measure, which is co-sponsored by Democratic Senator Brian Schatz of Hawaii, the “American Opportunity Carbon Fee Act.” It builds squarely on the growing consensus that clean energy will rapidly and fully displace fossil fuels only when polluters are made to pay for causing climate damage. AOCFA would impose fees on both CO₂ and non-CO₂ greenhouse gases including fugitive methane from shale gas wells and coal mines. AOCFA also includes a border tax adjustment to impose equivalent climate pollution fees on imported goods from nations that have not enacted their own climate pollution fees. (Click here for background on border tax adjustments.)

AOCFA pegs its pollution fee to U.S. EPA’s estimate of the “social cost of carbon.” The fee would start at EPA’s current estimate of that cost, now $42 for each ton of carbon dioxide, and would rise by 2% annually in real terms. Emissions of methane and other greenhouse gases would be charged in proportion to their estimated per-unit global warming impacts relative to carbon dioxide.

The Senator’s office estimates that AOCFA would raise $2 trillion in revenue in its first ten years, money that would fund an “American Opportunity Trust Fund” to be returned to the American people in as many as nine different ways including tax cuts, dividends, infrastructure investments and debt relief. E&E News reporter Jean Chemnick wrote today that the bill “leaves open the question of how those revenues would be spent as an invitation for would-be Republican collaborators to negotiate.”

Sen. Whitehouse’s decision to link his bill’s climate pollution fees to the social cost of carbon could be problematic, however. Published estimates of the social cost of carbon vary from as little as $10 per equivalent ton of CO₂ to over $300, depending on what is counted as climate damage, what discount rate is assumed to convert future losses to present terms, and how heavily if at all catastrophic risk scenarios are factored in. And while hitching the pollution fee to the EPA social-cost estimate may resonate with some stakeholders, it could limit the level of the carbon tax and, thus, its ability to drive down U.S. emissions rapidly enough, let alone global emissions. [Read more…]

Today’s welcome announcement of a surprise U.S.-China agreement to curb greenhouse gas emissions almost certainly commits the United States to a national carbon price. Non-pricing measures, such as the EPA Clean Power Plan to cut power plant emissions and the ramp-up of auto fuel economy standards now underway, won’t be nearly enough by themselves to meet the new U.S. target of 25% lower emissions by 2025 vis-a-vis a 2005 baseline, according to calculations by the Carbon Tax Center.

This could be terrific news for carbon tax proponents, since it would finally require climate-concerned organizations and officials to put carbon pricing — preferably in the form of a revenue-neutral carbon tax — at the heart of their climate agenda. On the other hand, given the new Congressional ascendancy of the climate-deaf Republican Party, the 25% target could prove to be just another climate goal scuttled by U.S. political resistance.

Let’s start with the carbon emission numbers, which we’ve broken down between emissions from electricity generation, which account for around 40% of U.S. CO2 pollution, and emissions from the various “non-electric” sectors like automobiles, goods movement, air travel, industry and heating, which account for the other 60%. This division is useful for at least two reasons: there’s much greater maneuverability in electricity due to the relative ease of substituting clean sources like solar and wind for dirty coal and gas, and the U.S. already has an emissions goal for the electricity sector: the 30% reduction by 2030 (from 2005) embodied in the Clean Power Plan announced by President Obama this past June.

Non-electric-sector emissions will need to drop sharply to meet the 25% 2005-2025 reduction goal.

The key numbers are shown in the graphic. A 2025 target equaling 75% of actual 2005 CO2 emissions of 5,855 million tonnes (metric tons) from all U.S. sources equates to 4,391 million tonnes. With that figure established, let’s switch our reference frame to current (2013) emissions, which were 5,317 million tonnes. (All figures are from CTC’s carbon tax model, and some may differ from recently released official U.S. emission figures, but only slightly.)

The difference between 2013 emissions (5,317 million tonnes) and 2025-targeted emissions (4,391 million tonnes) is 926 million tonnes. That’s a 17.4% drop over just a dozen years. The questions are: where in the U.S. economy will these reductions take place, and how will they come about? [Read more…]

InsideClimate News just posted this piece as a guest editorial — today’s entry in a series leading to and during Climate Week in New York City.

By Charles Komanoff • Charles Komanoff directs the Carbon Tax Center in New York.

Which is mightier—the obstacles to enacting a U.S. carbon tax, or the tax’s unique capacity to drive down global-warming emissions quickly, massively and equitably?

At the Carbon Tax Center we’ve bet on the latter. And our bet will only get better if the climate movement coalesces its advocacy and organizing around a carbon tax.

Making polluters pay to emit carbon isn’t just textbook economics and basic fairness—though it is those things. A carbon tax is the only way for the climate damage caused by burning fossil fuels to be brought inside the arc of individual and societal decision-making that determines how much of those fuels society uses and, thus, how much carbon it emits.

Our banner sagged a bit during the People’s Climate March. Our message couldn’t be more clear.

These decisions range from the immediate and quotidian: take transit vs. car, refill at the tap vs. buy bottled water; to institutional and far-reaching: build airplane frames with ultralight composites vs. aluminum, locate in town vs. on the outskirts, contract with a wind farm vs. a coal generator.

Without a tax on carbon emissions, every choice like these―and billions are made daily―will remain so rigged that fossil fuels will never yield their central position in world energy supply—or at least not fast enough to keep climate change from spiraling out of control. But a tax gives us a fighting chance to keep climate tipping points at bay and stave off global warming’s most dire effects.

Notice I said carbon tax, not “price on carbon.” Forget cap-and-trade. It’s too complicated to resonate with the public, and too prone to manipulation and gaming. Moreover, the “revealed” prices from markets in carbon permits will always be too volatile for low-carbon entrepreneurs to bank on and for treasury departments to count on.

For a carbon price to be revenue-neutral—as I believe it must to command broad and bipartisan support—the revenue it will generate from one year to the next must be reasonably predictable. That means a knowable price, which only a carbon tax provides.

Why not pursue the politically easier path of subsidizing clean energy? Empirical evidence, for one thing. As we demonstrated in a report to the Senate Finance Committee earlier this year, even a perfectly tailored subsidies regime won’t deliver half as much carbon reduction as an equivalently priced carbon tax. Not to mention that subsidies require taxpayer dollars.

What about the EPA Clean Power Plan? Ingenious and well-meaning, to be sure. But too little, too late. The cuts apply only to electricity, they’re measured against a high (2005) baseline, and the states have until 2030 to comply. These concessions, while defensible on political grounds, have whittled down the plan’s target to a mere 7 percent cut in total U.S. CO2 emissions. And even that will necessitate navigating a minefield of litigation.

Why not simply mandate ever-decreasing carbon contents in every sector of use? Standards have helped make autos and appliances far more efficient, but making them the central climate strategy would require thousands of efficiency standards, each one bitterly contested. Moreover, standards by nature are reactive and binary, which leaves huge savings untapped. Not so for a carbon tax, which incentivizes each and every investment and behavior that cuts emissions.

The “gold standard” for a carbon tax is the Managed Carbon Price Act introduced in May by Rep. Jim McDermott (D-Wash.). The tax starts modestly, at $15 per ton of carbon dioxide, but rises stepwise to pass $100 within a decade. By effectively raising the prices of every BTU of natural gas, oil and, especially, coal burned in the United States, the McDermott bill will, by our estimates, cut U.S. carbon emissions by 30 percent by its 10th year―a pace nearly seven times faster than the EPA plan.

Not only that, the McDermott bill taxes the carbon content of imports from non-taxing countries, protecting U.S. manufacturers from unfair competition while motivating other nations to tax their climate pollution. It taxes methane and other greenhouse gases at their CO2 climate-change equivalents. And it returns every dollar of tax revenues to individuals as pro rata dividends—a simple but profound design that just might placate conservatives and other fiscal hawks. This “fee and dividend” revenue treatment will buffer two-thirds of U.S. households, including most low-income families, from the energy price increases the tax will entail. (Rep. John Larson’s America’s Energy Security Trust Fund Act of 2014 also specifies a robustly rising, revenue-neutral emissions tax.)

If the biggest block to game-changing climate legislation has been the fossil fuel-funded denialist movement, the timidity of climate advocates about carbon taxing may qualify as the runner-up. But as yesterday’s big march in New York City showed, the climate movement is rising and the American public may finally be stirring. Time is dreadfully short. Whatever qualms we’ve had about the t-a-x word must yield to opportunity and reality.

If you believe that the best policy for cutting U.S. carbon emissions — and the easiest political sell — is “cap-and-dividend,” you’re loving a NY Times op-ed keyed to a bill being introduced today by Rep. Chris Van Hollen (D-MD).

Van Hollen’s Healthy Climate and Family Security Act of 2014 would (i) create a permit system covering CO2 emissions for all fossil fuels extracted or brought into the U.S., (ii) auction off permits equaling U.S. emissions in 2005, (iii) ratchet down the number of permits by 80% by 2050, and (iv) distribute all of the proceeds “to the American people as equal dividends for every woman, man and child,” according to the op-ed, entitled The Carbon Dividend.

CTC finds that a 100% carbon-dividend will improve finances for 65% of U.S. households, not for 80%.

A bill structured like that is fairly ambitious, and it’s good to see it submitted to Congress alongside the McDermott Managed Carbon Price Act of 2014 introduced two months ago on May 28. (Our write-up of the McDermott bill is here.) And the Times op-ed, by U-Mass economics professor James Boyce, is written with unusual grace and persuasiveness, especially at the start:

From the scorched earth of climate debates a bold idea is rising — one that just might succeed in breaking the nation’s current political impasse on reducing carbon emissions. That’s because it would bring tangible gains for American families here and now.

A major obstacle to climate policy in the United States has been the perception that the government is telling us how to live today in the name of those who will live tomorrow. Present-day pain for future gain is never an easy sell. And many Americans have a deep aversion to anything that smells like bigger government.

What if we could find a way to put more money in the pockets of families and less carbon in the atmosphere without expanding government? If the combination sounds too good to be true, read on.

That’s terrific writing, and smartly keyed to the compelling theme that climate policy need not be sacrificial or a greased path to so-called big government. [Read more…]

A revenue-neutral carbon tax, in which all tax revenue would be returned to the public as a rebate check [“dividend”], receives 56% support. The largest gains in support [relative to opinion on a carbon tax w/o revenue mention] come from Republicans.

Conventional wisdom holds that a carbon tax is a political non-starter. However, results from the latest version of the National Surveys on Energy and Environment (NSEE) provide evidence of substantial public support for a tax on the carbon content of different fossil fuels when specific uses of tax revenue are attached. A majority of respondents support a revenue-neutral carbon tax, and an even larger majority support a carbon tax with revenues used to fund research and development for renewable energy programs. The carbon tax coupled with renewable energy research earns majority support across all political categories, including a narrow majority of Republicans. These findings generally confirm previous NSEE results when revenue use options are linked to carbon taxation. These are among the latest findings from the Spring 2014 NSEE [National Survey on Energy and Environment] from the Center for Local, State, and Urban Policy at the University of Michigan and the Muhlenberg College Institute of Public Opinion. (Click here for source; emphases added.)

FOR IMMEDIATE RELEASE — Public Views on a Carbon Tax Depend on the Proposed Use of Revenue, from the National Surveys on Energy and Environment (NSEE) / Press Release /July 21, 2014
[Read more…]

Over the Fourth of July holiday, Lorna Salzman forwarded me half-a-dozen emails about “global carbon budgets” that had been posted to an informal list-serve of U.S. and U.K. climate advotes. Lorna and I have been friends and colleagues since 1974; she may have been the first person to take seriously my interest in carbon taxing, circa 2003, and her encouragement had a lot to do with my starting the Carbon Tax Center several years later and more recently to my ramping up my involvement in CTC. This morning I posted the following response.

I have four points:

1. I’m flat-out befuddled by the interest from some in this group in “carbon budgets,” whether national, global or whatnot. I think they’re a dead end politically as well as a dodge scientifically.

The author, 40 miles from his lower-Manhattan home (2012 photo).

Why a dead end? Because nations cannot and will not agree on who should be allowed to consume and emit how much carbon pollution. Because devilish “details” like offshoring will inevitably confound any negotiations. Ditto, population growth, which will require continual dynamic adjustments to national shares.

Why a dodge? Because every link in the emissions-to-catastrophe chain is riven with uncertainty. We don’t know with great precision what level of emissions will lead to any level of warming. We don’t know what level of warming will be catastrophic. There isn’t even agreement on what “catastrophe” is.

What we can agree on is that (i) any feasible level of emission reduction is insufficient, and (ii) deeper reductions are better than shallow ones. These facts are irreconcilable with carbon budgets.

2. A carbon tax must be at the center of any effective policy to rein in emissions. It’s folly to think that regulations (even enlightened ones) and/or clean-energy subsidies (even efficient ones) and/or public-sector mobilization such as by the Allies to win World War II can ever push back comprehensively against the massive tide of cheap fossil fuels (that is: cheap sans a price for their climate damage). [Read more…]